The government is set to award two deepwater blocks, instead of chosen three, to the joint venture of US-based ConocoPhillips and Norwegian Statoil for oil-and-gas exploration in the Bay of Bengal.
Officials said the Energy and Mineral Resources Division (EMRD) under the ministry of power, energy and mineral resources (MPEMR) has decided in principle to offer two deepwater blocks from among the proposed three -- DS-12, DS-16 and DS-21.
The EMRD will place a proposal with the cabinet committee on economic affairs to approve awarding two of the blocks, one official said.
The ministry officially refused to say which two blocks would be offered to the Conoco-Statoil duo.
State-owned Petrobangla earlier had evaluated all the three separate bids for the three deepwater blocks from the JV and found them all responsive.
"But the EMRD has taken the decision to give two in line with a previous decision to award maximum number of two blocks to a single international oil company (IOC) for hydrocarbon exploration," the official added.
ConocoPhillips and Statoil jointly submitted bids for all the three blocks deep in the Bay of Bengal which were put on bidding under Bangladesh's 2012 licencing round.
They appeared as the single bidder for all the three blocks.
The JV has committed to investing $327 million for the three blocks, which are expected to run five years for initial exploration and three years for a subsequent exploration period.
US ConocoPhillips late last month decided to turn back from two other deepwater blocks due to 'poor' fiscal terms.
It is, however, still hopeful to secure the latest three Bay blocks where the fiscal terms are better.
"We look forward to the award of Blocks DS-12, -16 and -21 and to commencing exploration in these blocks with our partner Statoil as soon as possible," said an official of the US company.
"We wish to emphasise that our decision on blocks 10 and 11 is based on the technical and commercial merits of the blocks and PSC terms only and does not reflect any change in ConocoPhillips' strong interest in continued investment in exploration in Bangladesh and in the development of any commercial discovery that may be made."
The blocks ConocoPhillips has quit are DS-08-10 and DS-08-11 in the Bay of Bengal, which the company's country chief, Tom Earley, described as unviable, based on geological and geophysical works and its inability to acquire the new production-sharing contract terms that took effect four years after ConocoPhillips had won the blocks in 2008.
Under the new terms valid for blocks under the 2012 round, deepwater contractors would get a higher price for gas produced from their blocks; be exempt from paying a gas-transmission fee to Petrobangla; be allowed to sell up to 50 per cent of their gas production to third parties without having to go through Petrobangla; and be exempt from 37.50 per cent corporate tax.
The price of gas from the three blocks would be pegged to high-sulfur fuel oil (HSFO) prices, with the floor price for HSFO fixed at $100 per tonne and ceiling at $200 per tonne.
It works out to around $6.50 per Mcf (1,000 cubic feet).
The gas price will be 130 per cent of HSFO price ex-Singapore with biddable discounts.
Before pulling out from the two deepwater blocks, ConocoPhillips in June had sought an upward revision through talks with the state minister for power, energy and mineral resources, Nasrul Hamid.
"The government was not in a position to change the PSC terms for these deepwater blocks," Mr Hamid said earlier.
The company in April had backed out from signing a deal for shallow-water block SS-07 as the fiscal terms were deemed not supportive.
The government has been trying to develop resources offshore in the Bay of Bengal, but has made little progress so far.
The country is currently dependent on onshore fields for its natural gas output. Production at present is running at about 2,440 million cubic feet per day (mmcfd), against demand for around 3,000 mmcfd.
Bangladesh revised fiscal terms in the model production-sharing contract for the three blocks to make the 2012 bidding attractive to international oil companies.
azizjst@yahoo.com